Order, ERC Case No. 2015-043 RC
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Republic of the Philippines \\ ENERGY REGULATORY COMMISSIO'N . ,---- San Miguel Avenue, Pasig City . IN THE MATTER OF THE APPLICATION FOR APPROVAL OF THE SUPPLEMENT TO THE ENERGY SUPPLY AGREEMENT BETWEEN ZAMBOANGA DEL SUR I ELECTRIC COOPERATIVE, INC. (ZAMSURECO II) AND THERMA MARINE, INC. (TMI), WITH MOTION FOR PROVISIONAL AUTHORITY AND MOTION FOR CONFIDENTIAL TREATMENT OF INFORMATION ERC CASE NO. 2015-043 RC ZAMBOANGA DEL SUR II ELECTRIC COOPERATIVE, INC. (ZAMSURECO II) AND THERMA MARINE, INC. (TMI), Applicants. x- - - - - - - - - - - - - - - - - - - - - - - x ORDER On March 06, 2015, Zamboanga Del Sur II Electric Cooperative, Inc. (ZAMSURECO II) and Therma Marine, Inc. (TMI) filed A joint application for the approval of their Supplement to the Energy Supply Agreement, with motion for provisional authority and motion for confidential treatment of information. In the said joint application, ZAMSURECO II and TMI alleged, among others, the following: 1. ZAMSURECO II is A non-stock, non-profit. electric cooperative, organized and existing under and by virtue of Presidential Decree No. 269, as amended, with principal address at Pangi, Ipil, Zamboanga Sibugay. It holds an exclusive franchise issued by the National Electrification ERC CASE NO. 2015-043 RC ORDER/May 15, 2015 Page 2 of 19 Commission to operate an electric light and power distribution service in Bayog, Zamboanga Del Sur, the Municipalities of Buug, Diplahan, Imelda, Ipil, Kabasalan, Kumalarang, Lakewood, Mabuhay, Malangas, Naga, Olutanga, Payao, Siay, Tulusan, Titay, Tungawan, all in the Province of Zamboanga Sibugay, the Municipalities of Sibuco, Siocon, Siraway, in the Province of Zamboanga Del Norte as well as the District of Vitali in Zamboanga City (Franchise Area); 2. TMI is a generation company duly organized and existing under the laws of the Republic of the Philippines with principal office address in Mobile 2, Lawis, Sta. Ana, Nasipit, Agusan del Norte. Copies of TMI's Securities and Exchange Commission Certificate of Registration, Articles of Incorporation and By-Laws, General Information Sheet and Audited Financial Statements are attached to the joint application as Annexes "A", "B", "C" and "D," respectively; 2.1 TMI owns and operates the 100 MW Power Barge No. 117 (PB 117) in Nasipit, Agusan Del Norte and the 100 MW Power Barge No. 118 (PB 118) in Maco, Compostela Valley, which it acquired from the Power Sector Assets and Liabilities Management Corporation (PSALM) upon' their privatization in accordance with Republic Act No. 9136, otherwise known as the "Electric Power Industry Reform Act of 2001 (EPIRA); and 2.2 TMI is joining ZAMSURECO II as co-applicant in this case in order to assist it in securing approval of the terms and conditions of the Energy Supply Agreement dated 23 May 2011 (ESA),as amended by the Supplement to the Energy Supply Agreement dated 19 January 2015 (Supplement Agreement), entered into by and between ZAMSURECO II and TMI', ERC CASE NO. 2015-043 RC ORDER/May 15, 2015 Page 3 of 19 NATURE OF THE APPLICATION 3. The instant joint application seeks approval by the Commission of the ESA, as amended by the Supplement Agreement, entered into by and between ZAMSURECO II and TMI, pursuant to Rule 20 (8) of the Commission's Rules of Practice and Procedure (ERC Rules). Copies of the ESA and the Supplement Agreement are attached to the joint application as Annexes "E" and "F", respectively; STATEMENT OF FACTS 4. ZAMSURECO II currently sources the bulk of its electricity requirements from the Power Sector Assets and Liabilities Management Corporation (PSALM) and the remainder from Therma South, Inc., GN Power and TM!. 4.1 On May 23, 2011, ZAMSURECO II entered into an ESA with TMI for the supply of 4MW for a term of three (3) years from Effective Date of March 8, 2012 (Original Term). The ESA was approved by the Commission in a Decision dated October 29, 2012 in ERC Case No. 2011-126RC, with the following applicable rates: Cost Component A )proved Rates Capacity Fee 2012 278 (PhP/kW/month) 2013 296 2014 323 2015 305 Fixed O&M Fee 239 (PhP/kW/month) Enerov Fee (PhP/kWh) 0.14864 Fuel and lube Oil Rate Pass thru cost based on fuel consumption rates of 0.2210 liter/kWh or actual, whichever is lower, for Heavy Fuel Oil (HFO) and 0.00313 liter/kWh or actual, whichever is lower, for lube Oil (lm ERC CASE NO. 2015-043 RC ORDER/May 15, 2015 Page 4 of 19 4.2 Details of ZAMSURECO II's other supply contracts are as follows: DATE OF CONTRACT EXECUTION OF SUPPLIER TERM ERC APPROVAL CAPACITY SUPPLY CONTRACT PSALM 6.3MW 12/26/2012 3 Years Therma South, Inc. 10.0MW 5/15/2013 25 Years Nov. 14, 2014 GNPower, Provisional Approval Inc. 16.3MW 11/21/2012 20 Years April 28, 2014 5. It is expected' that the energy requirements of ZAMSURECO II's customers will significantly increase in the next few years as demonstrated by ZAMSURECO II's Distribution Development Plan ("DDP"), which is hereto u attached as Annex "G ,, 6. The expiration of the Contract for the Supply of Electric Energy with PSALM in 2016, as well as the projected increase in the energy requirements of ZAMSURECO II's customers will result in a shortage of the energy available to it and its customers; 7. On January 19, 2015, ZAMSURECO II and TMI executed the Supplement Agreement extending the term of the ESA for an additional period of three (3) years from the expiration of the term (Additional Term) and stipulating the rights and obligations of the Parties during the Additional Term, which shall be under the same terms and conditions of the ESA, subject to the following: SALIENT PROVISIONS OF THE ESA AS AMENDED BY THE SUPPLEMENT AGREEMENT 8. Additional Term. The Supplement to the ESA provides that the ESA shall remain in force for an additional period of three (3) years from the expiration of the Original Term, commencing on March 8, 2015 and shall terminate on March 8, 2018 unless either Party sends a written notice of pre-termination to the other Party at least sixty (60) days prior to the end of each contract year. The ERC CASE NO. 2015-043 RC ORDER/May 15, 2015 Page 5 of 19 Supplement to the ESA further provides that it may be terminated effective on the Operations Effective Date defined in the Energy Supply Agreement between ZAMSURECO II and TSI covering the supply of power from the coal-fired power plant of TSI or, if Operations Effective Date of the power plant of TSI has not yet occurred by the end of the Additional Term, the ESA shall be automatically renewed on a year-to-year basis, unless earlier terminated in accordance with the provisions of the ESA. Upon expiration of the Additional Term, and any extensions thereof, the Parties may agree to further extend the term of the Agreement under the same terms and conditions of the ESA, as amended by the Supplement Agreement; 9. Electricity Fees. Beginning on the expiration of the Original Term, the Electricity Fees shall be computed based on the following values: 2013 2014 2015 2016 2017 2018 CF PhP/kW/mo 296 323 305 287 268 250 FOM PhP/kW/mo 239 314 314 314 314 314 EF PhP/kWh 0.14864 0.15245 0.15245 0.15245 0.15245 0.15245 HFCR L/kWh 0.23580 0.23580 0.23580 0.23580 0.23580 0.23580 LOCR L/kWh 0.00240 0.00240 0,00240 0.00240 0.00240 0.00240 The CF and FOM for 2013 to 2015 and the EF for 2013 are based on the Decision of the Commission dated October 29, 2012 in ERC Case No. 2011-126 RC, while the HFCR and LOCR for 2013 to 2015 are based on the Decisions dated November 26, 2012 in ERC Case Nos. 2012-057 RC,1 2012-060 RC,2 2012-058 RC,3 2012-045 RC,4 2012-063 RC,5 2012-086 RC,6 2012-039 RC,72011-126 RC,8 g 2011-114 RC and 2011-087 RC.1O 1 In the Matter of the Application for Approval of the Energy Supply Agreement (ESA) Between Bukidnon Second Electric Cooperative, Inc, (BUSECO) and Therma Marine, Inc. (TMI), With Prayer For Provisional Authority, Bukidnon Second Electric Cooperative, Inc. (BUSECO), Applicant. 2 In the Matter of the Application for Approval of the Energy Supply Agreement (ESA) Between Camiguin Electric Cooperative, Inc. (CAMELCO) and Therma Marine, Inc, (TMI), With Prayer For Provisional Authority, Camiguin Electric Cooperative, Inc, (CAMELCO), Applicant. 3 In the Matter of the Application for Approval of the Energy Supply Agreement (ESA) Between Cotabato Electric Cooperative, Inc. (COTELCO) and Therma Marine, Inc. (TMI), With Prayer For Provisional Authority, Cotabato Electric Cooperative, Inc, (COTELCO), Applicant. 'In the Matter of the Application for Approvai of the Energy Supply Agreement (ESA) Between Misamis Occidental I Electric Cooperative, Inc. (MOELCI I) and Therma Marine, Inc. (TMI), With Prayer For Provisional Authority, Misamis Occidental I Electric Cooperative, Inc. (MOELCI I), Applicant. ERC CASE NO. 2015-043 RC ORDER/May 15, 2015 Page 6 of 19 9.1 The formula for FC in item 2 (Contract Energy Fee per month) of Schedule III (Contract Energy Fee) of the ESA shall be deemed amended to read as follows: 11 INS) Be ] Fe = [CF + (FOM) (iFf)J BC + [( 12. TotalBC INS = INSy - INS1 Where: INSy = actual insurance cost for the two barges for the current year INS1 = PhP43,035,782.00 for the two barges, representing insurance cost included in the FOM Total BC= Total Billing Capacity for the two barges under the existing energy supply agreements and existing ancillary service procurement agreements 5 In the Matter of the Application for Approval of the Energy Supply Agreement (ESA) Between Misamis Occidental II Electric Cooperative, Inc.